The Financial Conduct Authority (FCA) has set August 31, 2023 as the deadline for connecting the largest private and stakeholder pension providers to the pension dashboard ecosystem.
Even after almost a year, there are still many questions to be answered. What does this mean for the industry and consumers? Will it work as planned and what can be done to make retirement dashboards a benefit for savers and advisors?
As with any new fintech platform – and particularly at such a scale as the pensions dashboard ecosystem – it’s inevitable that there will be some teething problems, write David Hatch, managing director of Options UK, and Mark Adamson, sales director at Pension Data Management company ITM.
But nonetheless, all stakeholders in the industry should embrace it as a positive and much-needed technology-led revolution that will benefit consumers, advisors, solution providers and the pension sector as a whole over the long term.
Retirement dashboards are very important to the sector and consumers as they really have the potential to revolutionize the way people handle all of their retirement income by making it easy to find all of their retirement data in one place and to display.
Pension providers and trustees in both the private and public sectors – and also the government, as the dashboards will include state pension data – have all been held accountable for enabling pension scheme members to find their pension benefits. This can also be a first step in educating members.
However, the benefits will only be realized if the ecosystem works as intended.
As with any data system, the old IT adage “garbage in, garbage out” still applies. Accurate member identity data is fundamental to the success of the dashboard project. The identification details used by each pension member must match the details held by all pension providers in the UK.
If this is not the case, pensioners will not have access to an accurate record of their pension entitlements. This is the first challenge. The second challenge is to ensure that retirees see a full record of all of their retirement benefits.
The last one allows them to understand what these numbers mean. A member may be presented with a combination of defined contribution (DC), defined benefit (DB), and hybrid scheme data. That might be confusing enough, but beyond that, different providers and systems have different ways of presenting the pension data they have.
These factors combine to create a risk that it could be very difficult for most consumers to figure out what the Retirement Dashboard data actually means for them and their retirement plans. But work is in progress to solve this problem.
From a vendor’s perspective, companies need to ensure that dashboard source data is accurate and that consumers are given the support they need to understand it.
Consumers need help from their pension provider in the form of signposts directing them to the help they may need and that is something we at Options UK are already putting in place.
But they also need support from services like Pension Wise and professional advice from IFAs. All of these sectors must work together if the dashboard data is to translate into tangible benefits for consumers.
Industry must embrace the new ecosystem and its goals if all potential benefits are to be realised. While the primary purpose of retirement dashboards is currently to provide a portal for retirement members to access information quickly and easily, it could evolve into a retirement planning tool in the long term.
But that possibility is a long way off. For now, the focus must be on the first cohort of systems linked to the pensions dashboard ecosystem by August 31 next year.
The journey so far has had a few more twists than many in the industry would have liked. However, pension dashboards are a major milestone on a journey that will ultimately lead to a modernized, technologically advanced, and customer-centric industry.
This article was written for International Advisor by David Hatch, Managing Director of Options UK, and Mark Adamson, Sales Manager at pension data management firm ITM.